Nonresidential building starts fell 9% in March, contributing to a 1% drop in total construction starts.

Nonresidential building starts fell 9% in March, contributing to a 1% drop in total construction starts. Dodge Construction Network (DCN) officials say high rates and restrictive credit are to blame for the slow start to 2024.

Overall, total construction starts fell 1% to a seasonally adjusted annual rate of $1.06 trillion, while residential starts increased by 1%. On a year-to-date basis through March, total construction starts were up 13% from the first three months of 2023. Residential starts rose 24%, and nonresidential building starts grew 2%.

“The construction sector has hit a soft patch to start 2024,” says Richard Branch, DCN’s chief economist. “However, this should not be overly surprising given high rates and restrictive credit. There are bright spots, though, as single-family starts are moving higher and federal dollars are lifting nonbuilding starts. The recent hot inflation readings likely mean that rate cuts won’t happen until later in the year, and as a result, the commercial and multifamily sectors will continue to languish.”

Nonresidential

Nonresidential building starts fell 9% in March to a seasonally adjusted annual rate of $363 billion. Manufacturing starts were down 58%, while commercial starts fell 1% due to a pullback in office and hotel starts. Institutional starts gained 4% in March due to large healthcare projects getting underway. On a year-to-date basis through March, total nonresidential starts were up 2%. Institutional starts were 12% higher, while commercial starts were flat, and manufacturing starts lost 15%.

The largest nonresidential building projects to break ground in March were the $1.3 billion Rady Children’s Hospital Intensive Care Unit in San Diego, the $600 million Google data center in The Dalles, Oregon, and a $532 million prison in Leavenworth, Kansas.

Residential

Residential building starts were 1% higher in March and sat at a seasonally adjusted annual rate of $400 billion. Single-family starts improved by 9%, while multifamily starts lost 14%. On a year-to-date basis through three months, total residential starts were 24% higher. Single-family starts improved by 34%, and multifamily starts were 9% higher.

The largest multifamily structures to break ground in March were the $385 million One Naples Ritz Carlton residences in Naples, Florida, the $261 million 100 North Main mixed-use project in Memphis, and the $190 million The August at Steelpointe Harbor project in Bridgeport, Connecticut.

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